Chapter 11: Online service industries. After reading this chapter, you will be able to: Describe the major features of the online service sector. Discuss the trends taking place in the online financial services industry. Identify the key features of the online banking and brokerage, insurance, and real estate industries. Explain why online travel services can be considered the most successful B2C segment. Describe the major trends in the online travel services industry today. Explain why career services online may be the ideal Web business. Identify current trends in the online career services industry.
E-commerce business technology society Third Edition Kenneth C Laudon Carol Guercio Traver Copyright © 2007 Pearson Education, Inc Slide 11-1 Chapter 11 Online Service Industries Copyright © 2007 Pearson Education, Inc Slide 11-2 NetBank and the Future of Branchless Banking Class Discussion What is the value proposition of online banks? Why have stand-alone online banks in the United States not done well? What were the key ingredients of NetBank’s business model that made it successful? Why most Americans still prefer to use their local branch bank? Copyright © 2007 Pearson Education, Inc Slide 11-3 The Service Sector: Offline and Online Service sector: Largest and most rapidly expanding part of economies of advanced industrial nations In the United States, services plus fire, insurance, real estate sector employs about 42% of labor force; accounts for $4.2 trillion of GDP in 2005 Copyright © 2007 Pearson Education, Inc Slide 11-4 What are Services? Service occupations: Are “concerned with performing tasks” in and around households, business firms, and institutions Service industries: “Domestic establishments providing services to consumers, businesses, governments, and other organizations” FIRE is largest segment of services industry Copyright © 2007 Pearson Education, Inc Slide 11-5 Categorizing Service Industries Within service industry groups, can be further categorized into: Transaction brokers Hands-on service provider Services industry features: Knowledge- and information-intense, which makes them uniquely suited to e-commerce applications Amount of personalization and customization required differs depending on type of service Copyright © 2007 Pearson Education, Inc Slide 11-6 Online Financial Services Online financial services sector an example of an e-commerce success story, but success is somewhat different from what had been predicted Pure online financial services firms in general are not yet consistently profitable Multi-channel established financial services firms are showing fastest growth and strongest prospects Copyright © 2007 Pearson Education, Inc Slide 11-7 Financial Service Industry Trends Financial services industry provides four generic kinds of services: Storage of and access to funds Protection of assets Means to grow assets Movement of funds Two important global trends Industry consolidation (Financial Reform Act of 1998 amended Glass-Steagall Act and allows banks, brokerages, and insurance firms to merge) Movement toward integrated financial services (financial supermarket model) Copyright © 2007 Pearson Education, Inc Slide 11-8 Industry Consolidation and Integrated Financial Services Figure 11.1, Page 624 Copyright © 2007 Pearson Education, Inc Slide 11-9 The Financial Supermarket Model: Integrated Online Financial Services Figure 11.2, Page 625 Copyright © 2007 Pearson Education, Inc Slide 11-10 Insight on Society: Turf Wars—Antitrust and the Online Real Estate Market Class Discussion What is a Multiple Listing Service (MLS) and how does the National Association of Realtors maintain a monopoly over this service? Why does the Department of Justice believe the NAR’s policies are anti-competitive? Why can’t online real estate firms develop alternatives to local multiple listing services? Would you buy a home using eBay or Craigslist? Copyright © 2007 Pearson Education, Inc Slide 11-23 Online Travel Services Arguably, the single most successful B2C ecommerce segment; attracts single largest audience, and largest slice of B2C revenues Internet becoming most common channel used to research travel and book reservations 2005: $80 billion in revenue, expected to grow to $150 billion by 2009 Popular because they offer consumers more convenience (one stop; offers content, commerce, community, customer service) than traditional travel agents For suppliers, offers a singular, focused customer pool that can be efficiently reached Copyright © 2007 Pearson Education, Inc Slide 11-24 Total U.S Online Travel Booking Revenue Figure 11.5, Page 650 SOURCE: Based on data from eMarketer, Inc., 2005e, 2005f; authors’ estimates Copyright © 2007 Pearson Education, Inc Slide 11-25 Travel as the Ideal Internet Product/Service An information-intensive product An electronic product in the sense that travel arrangements can be accomplished for the most part online Does not require inventory Suppliers are always looking for customers to fill excess capacity Do not require an expensive multi-channel presence Copyright © 2007 Pearson Education, Inc Slide 11-26 Online Travel Services Components Airline reservations the largest single component ($38.5 billion in 2005; $60 billion in 2009) Hotel reservations ($20.5 billion in 2002, $40 billion in 2009) Car reservations ($2.7 billion in 2005, $5.2 billion in 2009) Cruise/tour reservations: fairly slow growth since not as well suited for online environment Major segments: Leisure Business travel – expected to be a major growth area as corporations seek better control of corporate travel expenses Copyright © 2007 Pearson Education, Inc Slide 11-27 Projected Growth of Online Travel Market Components Figure 11.6, Page 653 SOURCE: Based on data from eMarketer, Inc., 2004; Forrester Research, 2004; Jupiter Media Metrix, 2001b, authors’ estimates Copyright © 2007 Pearson Education, Inc Slide 11-28 Projected Growth of Leisure/Unmanaged Business and Managed Business Travel Figure 11.7, Page 654 Copyright © 2007 Pearson Education, Inc Slide 11-29 Online Travel Industry Dynamics Competition among online providers is intense Industry is going through a period of consolidation as stronger, offline established firms purchase weaker and relatively inexpensive online firms Suppliers (the large national airlines, hotel chains, auto rental companies, etc.) are attempting to eliminate the intermediaries such as the global distribution systems and travel agencies, using the Web as a means Copyright © 2007 Pearson Education, Inc Slide 11-30 The Travel Services Value Chain Figure 11.8, Page 656 Copyright © 2007 Pearson Education, Inc Slide 11-31 Insight on Business: Zipcars Class Discussion What is the Zipcar business model? How does it make money? How does Zipcar use the Internet? Does Zipcar compete with traditional car rental firms? Would Zipcar work only in urban markets? Could it expand to the suburbs? Copyright © 2007 Pearson Education, Inc Slide 11-32 E-commerce in Action: Expedia.com Online travel services company that provides access to information about and sales of travel arrangements Originally started by Microsoft, subsequently purchased by InterActiveCorp, then spun-off into separate public company in 2005 One of top players in online travel services, generating revenues of $2.1 billion in 2005 Copyright © 2007 Pearson Education, Inc Slide 11-33 Online Career Services Next to travel services, one of Internet’s most successful online services Dominated by Monster.com (owned by Monster Worldwide), CareerBuilder.com, and HotJobs.com (owned by Yahoo) Online recruiting provides a more efficient and costeffective method of linking employers and potential employees, while reducing total time-to-hire Enables job hunters to more easily build, update, and distribute resumes while gathering information about prospective employers and conducting job searches Ideally suited for Web due to information-intense nature of process Copyright © 2007 Pearson Education, Inc Slide 11-34 Why are Job Sites So Popular? Saves time and money for both job hunters and employers For employers: Expand geographic reach of search, lower cost, and result in faster hiring decisions For job seekers: Make resumes more widely available, and provides a variety of related jobhunting services One of most important functions: Ability to establish market prices and terms (online national marketplace) Copyright © 2007 Pearson Education, Inc Slide 11-35 Recruitment Market Segments Three major segments General job recruitment: Largest segment and primary focus Executive search: highest revenue potential Specialized job placement services: often run by professional societies Copyright © 2007 Pearson Education, Inc Slide 11-36 Online Recruitment Industry Dynamics Four major trends: Consolidation: Monster, CareerBuilder, and HotJobs together constitute 90% of market Diversification of product line: niche sites Localization: Local boards compete with local newspapers; Craiglists Job search engines “scrape” listings: Indeed.com, SimplyJobs, JobCentral Copyright © 2007 Pearson Education, Inc Slide 11-37 ... Education, Inc Slide 1 1- 12 The Growth of Online Banking, 2000–2010 Figure 11. 3, Page 628 SOURCE: Based on data from eMarketer, Inc., 2005a Copyright © 2007 Pearson Education, Inc Slide 1 1- 13 Online Brokerage... Pearson Education, Inc Slide 1 1- 8 Industry Consolidation and Integrated Financial Services Figure 11. 1, Page 624 Copyright © 2007 Pearson Education, Inc Slide 1 1- 9 The Financial Supermarket Model:... Education, Inc Slide 1 1- 14 Multi-channel vs Pure Online Financial Service Firms Online consumers have made it known that they prefer multi-channel firms with physical presence Multi-channel firms